Interest on reversed credit before 12-5-2001 was remanded for fresh adjudication; later-period liability was accepted.

Interest on reversed credit was disputed for the period before 12-5-2001, with the assessee arguing that Section 11AB applied only where duty was demanded under the proviso to Section 11A and that Section 11AA required unpaid duty to remain outstanding for three months. The assessee also said the amount had been paid before the show-cause notice, so no interest arose for the earlier period. As these submissions had not been examined by the lower authorities, the matter was sent back for fresh adjudication after hearing the assessee. Liability for the period after 12-5-2001 was accepted.

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Issues: Whether interest was payable for the period prior to 12-5-2001 on reversal of credit made before issuance of the show-cause notice, and whether the matter required remand for fresh decision.

Analysis: The dispute concerned interest on reversed credit for the period April 2000 to September 2001. It was noted that the assessee accepted liability for the period after 12-5-2001, but contested interest for the earlier period on the ground that prior to that date Section 11AB of the Central Excise Act, 1944 applied only where duty was demanded under the proviso to Section 11A, and that under Section 11AA interest would arise only if duty determined remained unpaid for three months. Since the amount had been paid before issuance of the show-cause notice, the assessee contended that no interest was payable for the earlier period. As these legal submissions had not been examined by the lower authorities, the impugned order was set aside and the issue was sent back for fresh adjudication after hearing the assessee.

Conclusion: Interest liability for the period prior to 12-5-2001 was remanded for fresh determination, while liability for the subsequent period was upheld.

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